Factbox-How Trump can overhaul US financial regulators when he takes office

By Michelle Price

WASHINGTON (Reuters) – President-elect Donald Trump is expected to overhaul U.S. financial regulators, which under Democratic President Joe Biden have pursued a slew of stringent new rules for banks, private funds and other lenders. Here’s how Trump could take control of the agencies upon taking office. 

US SECURITIES AND EXCHANGE COMMISSION 

The SEC comprises five politically appointed commissioners, with the current balance being three Democrats and two Republicans.

Democratic SEC Chair Gary Gensler said last week he will step down in January, at which point Trump is expected to appoint one of the two Republican commissioners, Hester Peirce or Mark Uyeda, as acting chair.

Trump also has the option of appointing Peirce or Uyeda to the role permanently, but Reuters and other media outlets have reported that his transition team is considering external candidates who would have to be confirmed by the Senate.

Also last week, Democratic commissioner Jaime Lizarraga said he would step down in January, meaning Republicans will control the agency from Jan. 20, allowing them to quickly set about overhauling crypto policy and other regulations.

COMMODITY FUTURES TRADING COMMISSION CHAIR ROSTIN BEHNAM

The president picks the CFTC chair from among its five politically appointed commissioners, and the law does not say explicitly whether the president can fire a commissioner. The president may, though, replace the chair with another commissioner. However, traditionally the chair resigns when a different political party takes over the White House.

Trump is expected to replace Democratic Chairman Behnam with one of the agency’s Republican CFTC commissioners as acting chair: Summer Mersinger or Caroline Pham. The permanent chair would have to be confirmed by the Senate and Trump’s transition team is also considering external candidates, Reuters reported.

CONSUMER FINANCIAL PROTECTION BUREAU

In 2020, the U.S. Supreme Court handed the president more authority over the Consumer Financial Protection Bureau, including by empowering him or her to fire its director at will. 

Assuming Democratic CFPB Director Rohit Chopra does not resign, Trump is expected to remove him on day one, but the question of who can serve as acting director has historically been contentious. The Trump administration in 2017 asserted that it had the power under the 1998 Federal Vacancies Reform Act to install an acting CFPB director, while the agency’s deputy director at the time, Leandra English, argued that under the 2010 Dodd-Frank law which created the agency she was its rightful interim director.

The extraordinary dispute went to court and a federal judge in Washington sided with the Trump administration. The appeals court did not adjudicate the case. 

CFPB experts believe Trump could successfully cite both the district court ruling and the 2020 U.S. Supreme Court decision in asserting his right to appoint the interim director.

Chopra’s permanent replacement would have to be confirmed by the Senate.

ACTING COMPTROLLER OF THE CURRENCY MICHAEL HSU

Trump would have the power to immediately replace Acting Comptroller of the Currency Michael Hsu, the national bank regulator, with another acting comptroller. That person could run the agency, potentially for years, until the Senate confirms a permanent Comptroller. 

FEDERAL DEPOSIT INSURANCE CORPORATION 

The FDIC is run by a five-member board of political appointees, which is currently weighted three-two in Democrats’ favor. Two of those spots have to be filled by the comptroller of the currency and the CFPB director.

Democratic chair Martin Gruenberg has said he’ll retire in January. With the Senate confirmation of his replacement, Democratic Biden nominee Christy Goldsmith Romero, now stalled, FDIC Vice Chair Travis Hill looks set to become acting chair in January. He would have to be nominated by Trump and confirmed by the Senate to assume the role permanently.

With Hill in charge, and by replacing either Chopra or Hsu, Trump would immediately hand control of the agency to Republicans, allowing them to quickly spike or overhaul a number of rules.

U.S. FEDERAL RESERVE VICE CHAIR FOR SUPERVISION MICHAEL BARR

The president can only fire Fed governors for cause, meaning Barr could stay in his role as the central bank’s regulatory chief until his term expires in July 2026. He told Congress this month that he intends to serve out his full term.

The Washington Post reported last month that Trump’s transition team discussed demoting Barr from his supervision role, although it is unclear whether the president has the power to do that.

But by replacing Hsu and packing the FDIC board, Trump could gain control of a large proportion of the bank regulatory agenda, and block any Fed projects that the central bank has to work on with the other two agencies. That could include the contentious Basel Endgame capital hikes, plans to require regional banks to issue more long-term debt, and new requirements ensuring banks have enough liquidity during times of stress.